China will soon require blockchain users to register with their government IDs

China’s central government has drafted a new regulation that would strip blockchains of their anonymity, requiring users to provide their real names and national ID card numbers when registering for a blockchain service. Trading Bitcoin is already banned in the country, but the policy will place significant restrictions on ongoing blockchain development.

On Friday, the Cyberspace Administration of China, the country’s internet regulator, released a draft of the policy, which would also require blockchain services to remove “illegal information” quickly before it spreads among users. The services will also be required to retain backups of user data for six months and provide them to law enforcement whenever necessary. Users who break the nation’s laws will be warned, have access to their accounts restricted, or have their accounts shut down, depending on what service providers deem appropriate.

The new rules are open to comment from the public until November 2nd, but it’s not clear when the policy will be enacted. It’s also less than obvious whether Beijing will take the comments into consideration and modify the policy in any way.

But the government’s policies on blockchain have been more favorable in the past. A July internet industry report from the South China Morning Post and 500 Startups Greater China found that the Chinese government was supportive of blockchain services — at least on the local level. Being technologically forward-thinking, startup central Shenzhen and Alibaba’s hometown of Hangzhou established large blockchain funds. It now appears that this aspect of forward thinking will come with some additional caveats that challenge one of blockchain’s core advantages: privacy and anonymity.

These kinds of restrictions can already be seen within China’s mobile payments industry. Unlike PayPal, WeChat Pay requires users to register with a bank card or a national ID for over 1000 RMB ($143.99) in order to use the service. Weibo and other web services have a similar policy: you’re prompted to enter a Chinese phone number at minimum.

There have been two notable instances this year where Chinese users were able to subvert state censors through the blockchain. In April, student activists took to the Ethereum blockchain to post an open letter about sexual assault and harassment that was written by a student who had been threatened by her college not to talk. In July, Chinese internet users who were angry about low-quality vaccines published a viral news article on the blockchain in order to preserve it from censorship. Both the letter and article are still available on the blockchain, likely to the chagrin of internet regulators.